Case Study : New Products For The Company

The company started off producing 20,000 units of mountain bikes. We did not change the production quantity. Last year our forecast sales were 24,000 when we only sold 19,866; therefore we thought it would be best to leave production at 20,000 bikes. Having excess inventory, we concluded that 20,000 units should be enough considering our quality has not changed and our advertising will not increase the sales dramatically. Although we had the choice to produce as much as 30,000 units, we felt as though we did not have sufficient money to increase production. We were interested in allocating the money towards marketing as opposed to production. We realized that without awareness, no matter how many units we make, sales would be inefficient.

Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.

Starting from a company of less than 75 workers and owning less than 20,000 SCU for production, research, quality assurance and conduct warranty work Off The Chain Bikes has doubled the plant capacity and hearing doubling the workforce within two short years. The company is successful by targeting and capturing lucrative market shares by heavily investing in the desired technical specs and design styles of one of the most influential Racing bikes. Our keen ability to thoroughly research market demands, predicting competitive strategies between the four market majority shareholders by reviewing and interpreting the marketing reports and our aggressive design and development plans have significantly increased our market share and increase shareholder value. Our core competencies and strategic goals will be realized by carefully following our established plans and aggressively price our bikes to increase total market share.

By scrutinizing this information, they could begin to comprehend the relationship between humans’ behavior and their purchasing trends. In addition, comparing CSI (customer service indexes) and perceived quality by industry sector, assists marketers as to why many existing Allstate customers who own motorcycles don’t insure them with Allstate. Money is a discriminating factor and insurance is often a function of income. Many motorcyclists who don’t finance their purchases may opt out of insurance altogether. Short term financial performance indicators are useful in evaluating relative price metrics by formulating the market share participants in relation to market share value.

As shown in Exhibit, profitability has been a concern to Kootenay - gross margins are below industry average of 28-50% for its complete bike products (Entrée; -0.83%, Dlux; 7.76%, and Ultra;-6.73%) where materials have represented a high percentage of the costs (58 – 74%). Selling frame alone has shown stronger profitability (23.33%) but overall returns needs to be improved (ROA/ROE are -14%/-22%).

* KTM benefits from two long time players in the industry that attract investors confidence: Knünz and Pierer

A1. Budget Concerns Competition Bikes budget has several areas of concern that need to be address. 1. Units expected to be sold for year nine is 3510. Competition Bikes is predicting that they will sell 3510 Bikes but they only sold 3400 Bikes in year eight down 15% from year seven 4000 units sold. Competitions Bikes has budget to high because the current economic down turn is showing no signs of relief for the next three years. Many of Competition Bikes customers are sponsored riders and many sponsors have pulled their funding to their rides. Competition Bikes has not presents a plan that would support their projections. Competition Bikes should lower there should lower the expected units sold so not to over order raw materials that will

Since the Competition Bike Company projected overly optimistic sales, there are several areas in the budget that will be affected. The areas affected are Sales Commission, Transportation Out, Advertising, Research and Development, Raw Materials, and Labor.

The Company states in the summary that they attribute the net sales decrease in sales to the economy. The primary buyers of the bikes are professional bikers and with the sponsors of these professionals backing off the sales for this company took a direct hit. Competition Bikes Inc, also decreased advertising between years 7 and 8. This looks as

Probably increase marketing, promotional and expenses related to discounts in the subsequent year due to “Premier Vision” plan.

The database consists of customers that have purchased items with the last 12 months and their demographic information. The use of the catalog, internet, and retail stores has enabled the company to capture customer information, cross-market products, and provide a convenient shopping experience for customers. The company’s customers are primarily females with a passion for the riding sport. The customers are affluent and luxury oriented who tend to choose to buy from the company for the high quality and premier products. The customer base shows high repurchase rates and has been very loyal customers.

A major issue is since reducing the price 20% reduces the profit margin to 15%, to maintain the same profit while reducing the price, the sales must be $28 million for this year. This is an increase of 233% in one year to justify reducing the price this much. This is a highly unlikely target.

1) Evaluate HTC’s performance as described in the case. What are its competitive assets and liabilities?

Meanwhile, the sales revenue decreased 6.1%. However, Dirt Bikes' cost increased too quickly to almost 10%. (See Figure 1.5 and 1.6)

Porter five forces analysis is strategic analyses tool to understand the level of competition within an industry. The attractiveness of the industry is found by analysing five forces. In this context, the attractiveness of the industry is how profitable the industry is for the business and unattractive industry is the one where there is "pure competition". firms are driven to normal profit. The five forces include threat of new entrants, threat of substitute products or services, bargaining power of customers, bargaining power of suppliers and intensity of competitive rivalry (Porter & Heppelmann, 2014; Porter, 1983). Here, we will use porter five forces to see how it applies to bicycle Industry.